Decisions, Decisions

According to an analysis by Paladin Registry  in July, 2011, when choosing their financial advisor, 57% use a subjective approach, 31% use an objective approach and 10% have no process.

In his ByAllAccounts blog post How Investors Select Financial Advisors (October 24th, 2011),  Jack Waymire, President & CEO, Paladin Registry gives the following breakdown.

Subjective investors make their decision based on the following criteria:

  • Commissions – 54%  (They do not realize they pay for commissions in the end.)
  • Brand names – 48%  (They feel safer with a well known company.)
  • Likeability – 29%  (They trust people they like.)
  • Sales pitches – 17% (They believe everything they hear.)
  • Fund Performance – 11% (They think track record predicts the future.)
  • References – 9% (They trust what other people say.)
  • Written information -4% (If it’s it writing, it must be true.)

Objective investors have different criteria:

  • Compliance Record – 95% (But only 4% check.)
  • Experience – 82% (The longer you’ve been in business, the better.)
  • Fees – 61% (They believe fee-only is the appropriate way to pay for financial advice.)
  • College Degree – 53% (College is important as long as your degree has some financial relevance.)
  • Certifications – 44% (All those letters after your name matter.)
  • Documentation – 21% (If it’s it writing, it must be true.)

Jack Waymire concludes:

Subjectivity benefits advisors with the best sales skills. Objectivity benefits advisors with the best credentials, ethics, business practices and services. These differences are like night and day, but they are blurred by the sales skills of advisors.  The advisor with the best personality and sales skills wins in subjective selection processes.  The advisor with the best sales skills also has a major advantage in objective selection processes.

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